COVID-19 has had a devastating effect on businesses and has necessitated garment manufacturers in Bangladesh –the economy of which is predominantly dependent on apparel manufacturing and export – to rethink their business approach and work out strategies to adapt to the changing environment.
So, what are the challenges that they are facing currently and how do they plan to negotiate the same?
“This pandemic has devastated the global economy, and has forced all entrepreneurs to re-think our strategies and operation procedures. The huge loss of business due to buyers holding/cancelling most of our orders has created a strain in relationship between manufacturers and buyers. Due to lockdowns throughout the world, buyers have been renegotiating terms of payment, and to facilitate this change, we too are renegotiating our terms of payment with our suppliers. This has put immense pressure on the working capital, as we are receiving payments later than we used to. The most difficult task for all of us is going to be adapting to new price pressures as all of us were operating with unsustainable margins before the pandemic hit us,” Rafi Mahmud of Mahmud Denims Limited told Apparel Resources.
It may be mentioned here that as per some estimates, global buyers have so far cancelled work orders amounting to a massive US $ 3.15 billion. To add to this, many buyers have reportedly been asking for significant discounts and demanding extended payment terms from their suppliers which have put the apparel manufacturing sector of the country in further jeopardy.
According to reports, new work orders have declined by almost 62 per cent in the March-May period!
As per data collated by the country’s apex garment makers’ body, the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), compared to 454 orders received in the March-May period of last year, it was a mere 172 in the corresponding period this time around.
The breakdown of the fresh work orders in this period shows that BGMEA member factories in March this year received 87 work orders as against that of 138 received in March last year, while in April this year, new orders were just 8 compared to 136 received in April last year.
In the month of May, the BGMEA member units received just 77 work orders compared to 180 in May last year.
A renowned name in the realm of denim in Bangladesh, Mahmud Denims Limited has now decided to undertake a host of initiatives to address the challenges efficiently.
“As the world has never faced a crisis like this, for the time being it is very difficult to make informed strategies because the scenario is changing almost every day,” said Rafi, mindful of the fact that brands and retailers too are facing their own share of problems, and it would be difficult for the existing customers to secure the same capacities as before, at least for the time being.
But Rafi has his own scheme of plans to deal with this.
“We are slowly spreading and improving the market reach as a core marketing strategy. We are also working on offering strong innovations to our clients that will be more appropriate on their demand. While for operation, our major focus is on cost-cutting initiatives and enhancement on efficiency of scale of operation,” he explained.
Established in 2007 with just five production lines to produce formal trousers, Energypac Fashions Limited – a part of the conglomerate Energypac Group with diverse business interests like engineering, electronics, power, infrastructure development, ceramic, etc. – which grew over the years to be counted as one of the top apparel manufacturers in Bangladesh with global clientele is also faced with its own set of problems and is dealing with those in accordance.
“In line with the falling economy, many factories are in big crisis, so our corporate strategy needed to be changed. During the last couple of months, we have been manufacturing Personal Protection Equipment (PPE) and trying to engage different markets that support the minimum sustainability in the next financial year. After accounting for worker salaries, we have taken initiatives to reduce our overheads,” said Humayun Rashid of Energypac Fashions Limited.
Energypac, to keep the working capital rolling, has ensured to capture the easily accessible markets and make connections with customers to take orders as per their comfort. It has also enabled process re-engineering experts to establish the advantage of taking the edge over social distancing, claimed Humayun.
The global outbreak of coronavirus and its unexpected impact on businesses have however taught garment makers a lot that might hold them in good stead in the future, felt Rafi.
“This pandemic has taught us a very good lesson; the mistake most of us have done is putting all our eggs in one basket. We need to diversify both our supply chain and our selling should be spread out to more diverse destinations in order to minimise risk. From this learning, our management is continuously searching for more alternatives. Another lesson is, we had taken the world for granted, we all should do our part in saving back the planet and bring products that the ‘Earth Loves’,” explained Rafi.
The takeaways from the pandemic and business strategies formed by the manufacturers in line with the challenges, one could expect, would help the industry successfully negotiate the bottlenecks to keep afloat till normalcy returns one again.